I desperately need you to help me secure an adequate retirement. I’m afraid my assets will run out before I die. But stay away from me, advisor. I don’t trust you. I’ll keep my money in cash, even though it is counterproductive.

That is what clients are telling advisors today, said officials of Russell Investments at a press briefing for a new retirement planning program for advisors called Retirement Lifestyle Solution.
They warned that the financial securities industry must simplify retirement planning or risk losing all credibility with clients, who have become suspicious of advisors since the market meltdown of 2008.

Part of the problem is the average client has the responsibility for retirement, but is “incapable” of planning for a comfortable retirement, according to Timothy Noonan, Russell’s director of Capital Markets Insights for U.S. Private Client Services. The client needs an advisor, but is often suspicious that the financial professional is mainly interested in meeting a sales quota.

The result?

Since 2009 huge amounts of assets have moved into cash from equities and has stayed there, Noonan says. This comes at a time when many baby boomers desperately need to earn healthy rates of return for retirement.

“So here you have consumer investor shedding risk, hiding in cash, with real rates of return as negative values. It actually costs money to hold cash,” according to Noonan.

Since the meltdown, he adds, the financial services industry has created numerous new financial products, but many of them are failing because of these suspicions.

What should advisors do to help these wary investors?

First, they should ditch the term financial plan for retirement and construct an easy-to-understand funded ratio, one that will simply show assets versus liabilities, according to Noonan. Advisors should simplify retirement planning: Can an advisor easily show that a retirement can or cannot be fully funded over a certain period just as actuaries can measure the health of a pension fund?  

Second, advisors must offer value creation services instead of value captive services. The former are based on what the client needs and only can be created after numerous consultations with clients. The latter are designed from the point of view of a company looking for product sales.

“We think this is the fundamental divide in the financial services industry today,” Noonan says. “It’s between a world of people who cannot change their reference of people for products to a community of people who are interested in figuring out how people can solve a problem.”

Adds Sandy Cavanaugh, CEO for Russell’s advisor sold business: “Advisors are preparing for a sea change in their practices. Clients need more from them -- more time, more advice, more reassurance that they are on track with their savings, and more personalized portfolios.”

Retirement Lifestyle Solution, Russell officials say, will be sold to advisors as a way of achieving those goals.


The program will help advisors tailor a plan as assets and liabilities change in the few years before retirement and during retirement, according to Russell.

“The key is to make the plan accessible and adaptive and connect assets to liabilities,” says Rod Greenshields, consulting director, U.S. Private Client Services, Russell Investments.

“Funded ratio is really the way one can measure a client’s capacity for risk,” he adds.

Russell officials say the service contains no pat formulas for retirement withdrawals and spending. For instance, in a sample plan outlined, the initial withdrawal rate was 3.2%, not the 4% used by some advisors.

“Four percent is garbage,” Noonan said. He says it may be too much for some clients, leaving them without cash in their last years, but it also might be too little, requiring them to work more years then needed to fund retirement.

The sample for Retirement Lifestyle Solution also contained a 1 percent advisory fee, which Russell officials said clients would be willing to pay if their retirement problems can be solved.